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Clarification on DTI Ratio

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Anonymous
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Clarification on DTI Ratio

I have a question concerning DTI ratios, my FICO score is 660 and I will be the only one on the mortgage so we are limited on DTI even though we have more than enough income.  My husbands FICO scores are too low otherwise we would include him also.  We have picked out two houses one is at the upper end of what we want to spend the other is in the middle.  Me and my husband make about the same. 

 

With just my income my DTI on house one is 35% front end and 46% back end.  This DTI is using my Base Salary only.  I receive a 10% of salary bonus every year also but it is not guaranteed however I can prove I have received at least 8% or more for 5 straight years.  I did not include this bonus in my monthly salary.  After paying closng costs and down payment I would have 7 months of reserves on my back end ratio.

 

With just my income my DTI on house one is 41% front end and 53% back end.  This DTI is using my Base Salary only.  With this house I would have 3 months of cash reserves after closing and down payment

 

I have received a pre-approval from a mortgage broker through the automated underwriting system for house one.  I am just nervous that it will actually go through.  What are the chances that house one will get approved and what are the chances that house 2 will be approved?

 

Thanks

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ShanetheMortgageMan
Super Contributor

Re: Clarification on DTI Ratio

I'd say your chances are great for #1 & pretty good for #2 (as long as the lender doesn't have an overlay guideline that prohibits the debt ratio going over 50%).  We just got an approval for someone with a 659 FICO score, 32% front ratio, and a 56% back-end ratio, and zero reserves... and a little while ago got an approval for 652 FICO score, 41% front ratio, and 49% back end, also no reserves.

 

Your bonus income should be able to be used if it is "likely to continue", if you have received it for 5 years, then whatever bonus income has been received over the past 24 months should be averaged.  If so, then that puts your debt ratio below your figures.  Still it's good you calculated it without it to be on the conservative side.  Underwriter makes the final determination to use it, if they even need it.

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